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No boom, no bust for rentier model

The University of Cambridge’s major housing and research development is the “riskiest project the university has ever considered” but is based on a sound business model that relies on steady growth in rental charges for staff accommodation.

Those were among the arguments aired at the Regent House, the university’s governing body, when it was asked two weeks ago to grant authority to break ground on the North West Cambridge project.

The development will eventually create 1,500 homes for university and college staff, 1,500 homes for sale, accommodation for 2,000 students and 100,000 sq m of research facilities. It is to be financed in part by Cambridge’s recent £350 million public bond issue.

The first phase of the scheme alone is costed at £281 million.

Jeremy Sanders, the university’s pro vice-chancellor for institutional affairs, told the Regent House that to “remain at the international forefront we need to provide the environment and facilities that are vital for attracting and retaining world-class students and staff”, according to the report of the discussion in the Cambridge University Reporter.

He said that current postdoctoral students were “shocked…when they discover the high rents they will have to pay for low-quality housing in and around Cambridge”.

Professor Sanders added that the project’s funding model “derives its strength not from long-term reliance on high property prices but from the long-term inflationary growth of rental income from staff accommodation. “[It] works because the interest [on the bond] is fixed at a low rate for 40 years while rental income, linked to modest pay inflation, continues to grow. In short, this is not a speculative investment based on a booming property market.”

David Goode, a computer officer in Cambridge’s Faculty of Divinity, described North West Cambridge as not only the “most expensive and most exciting development project this university has considered” but also “the riskiest”. But he added that the risk was “acceptable”.

“We may never again have such an opportunity,” he said.

However, Mike Sargeant, IT business analyst at the university’s Management Information Services Division, complained that the rental accommodation would be reserved “exclusively for people associated with the university”. This could have been “an opportunity to build bridges to the wider community” but instead “it creates another area of Cambridge which will be seen as a university enclave,” he said.

The university’s council will towards the end of the month publish a response to the remarks made in the discussion. This will be followed by a ballot of the Regent House in the new year on whether to give the university the authority to go ahead with the project.